Clear Channel deal may be fading out

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KAI RYSSDAL:The government supplies a fairly steady trickle of economic indicators. So steady that, honestly, sometimes they slip by without much notice. There was one this morning that shouldn't go unmentioned. It's a little thing economists call "personal consumption." How much consumers are spending is a better way to say that. Up just a tenth percent last month, the weakest in a year and a half. The dilemma here is how's the economy gonna grow if nobody's spending any money, right?

Here's another indicator along the same lines, but a bit bigger: Clear Channel Communications. It's the biggest radio company in the country. It was supposed to have been bought out by a couple of private equity firms this month for more than 20 billion dollars. You know where this is going. The deal's been on the rocks all week thanks to the credit markets. And today Clear Channel said it might collapse outright. From New York, Marketplace's Jill Barshay reports

JILL BARSHAY: Six investment banks signed up last year to raise 22 billion dollars to fund the Clear Channel buyout. Chris Donnelly is vice president at Standard & Poor's LCD. He says now the banks are dragging their heels at the 11th hour because they can't find investors to buy the debt.

CHRIS DONNELLY: The banks are estimating that they could lose as much as 3 billion dollars just because there is no market in order to place this paper.

It's not just the debt market that's getting in the way of the deal. Tom Taylor tracks the radio industry at radio-info.com. He says Clear Channel's buyers are worried about slower growth. They may be looking for a way out to the deal too. Taylor admits radio isn't growing like it used to, but he says Clear Channel's business is healthy.

TOM TAYLOR: Radio remains very profitable. Radio station margins, what they call cash margins in the large markets, are often 40, 45, 50, even 60 percent. Which is an amazing number.

Clear Channel's buyers protest the banks have already agreed to the terms of the deal. Donnelly says if the banks pull out now, that could destroy trust in the financial markets.

DONNELLY: This creates a precedent that throws the entire private equities landscape into chaos.

Both the buyers and the banks are suing each other. It's now up to the judges to decide whether the deal goes through or not.